Urban safety-net hospitals will be in the firing line when sweeping Medicaid funding cuts outlined in the summer’s One Big Beautiful Bill take effect, according to an analysis published Monday.
In reviewing data on 4,412 general acute care hospitals from 2021 to 2023, researchers deemed 109 “most vulnerable to OBBBA Medicaid cuts” due to their status as either a safety-net hospital or critical access hospital, signs of financial distress and role serving a high percentage of Medicaid patients. Of these, 85% were urban and the remaining 15% were rural.
Amid lawmakers’ debates and negotiations on the OBBBA, concerns of hospital closures largely focused on rural facilities and populations. To bring a handful of key Republican holdouts on board, the bill includes a five-year, $50 billion fund to support rural care delivery during the transition period in which the OBBBA’s over $900 billion in Medicaid cuts—a combination of new limitations on states’ provider taxes, Medicaid work requirements and other more burdensome enrollment verification—begin to take effect.
The findings of the new analysis—conducted by the Healthcare Quality and Outcomes Lab at the Harvard T.H. Chan School of Public Health, in collaboration with the New York Times’ The Upshot data journalism team—outline “an underappreciated group” of hospitals particularly vulnerable to service reductions, distressed acquisition or outright closure due to the upcoming cuts, researchers wrote.
“Beyond rural hospitals, policymakers should closely monitor the health and performance of safety-net hospitals facing challenging financial and operating conditions, especially if accompanied by a high Medicaid patient mix in highly competitive markets,” researchers wrote in a data blog on the findings. “Preserving access to hospital care for patients served by these hospitals should be a federal and state policy priority.”
The 109 hospitals highlighted in the analysis were more likely to be in areas with less concentrated Medicaid markets. Nearly two in five were major teaching hospitals, 92.7% were part of a health system. More were located in the West (41.3%) and the Northeast (22.9%) and just five were critical access hospitals, a designation only available to facilities in rural communities. Private equity owned 7.3% of the 109 hospitals, as opposed to 4.6% of the full sample.
Researchers highlighted the limited representation of critical access hospitals among their list of highly vulnerable hospitals, and noted that federal policy bolstering Medicare reimbursement to those facilities “may buffer some of the impact of OBBA-related Medicaid cuts." They also described the exclusion of urban safety-net hospitals from the “inadequate in both size and scope” $50 billion Rural Health Transformation Program as “a glaring oversight by federal lawmakers.”
Interviews with leaders at these at-risk urban safety-net hospitals, featured in a concurrent article from the New York Times, highlighted rushed plans to limit costs through service line cuts, hiring freezes and pauses on maintenance-related capital spending well ahead of the funding reductions taking effect. The Times also underscored the facilities’ frequent specialization in services neglected by other hospitals or their provision of statewide services, including physician training.
The Healthcare Quality and Outcomes Lab noted that financial distress affects nearly a quarter of the nation’s hospitals, though the substantially greater share of people living in urban areas suggests “the closure of urban hospitals may have an equally or even more profound population-level impact than the closure of rural hospitals.” Both rural and urban hospitals, and particularly those in Medicaid expansion states, will likely be hit hard by expected reductions in healthcare coverage stemming from the bill, researchers added.
“The OBBBA cuts may increase the amount of uncompensated care provided by both rural and urban safety net hospitals,” they wrote. “As hospitals encounter the continued challenges of reduced reimbursement and rising expenses, hospitals and health systems may be pushed to eliminate clinical services or convert to emergency rooms or outpatient facilities. Policymakers should explore opportunities to bolster financial support for hospitals that would be most affected.”